Blinkx (LSE: BLNX) has fallen 76% to 36p during the last 12 months, diving from a 52-week high of 230p and only just sitting above its 52-week low of 30p. But what’s caused this massive decline?
Back in January, a widely read blog post appeared on the web that criticised Blinkx’s business practice, stating that its recent success was “outsized”. Management was forced to comment on the issue, attempting to arrest the resulting decline in share price by pointing out that the article was written by a Harvard business school professor who was paid by ‘unnamed third parties’, refuting the assertions and reaffirming its operational and financial outlook.
But despite this rebuttal and a lack of concrete evidence in the blog post, Blinkx’s shares kept on dropping as the market seemingly lost confidence in the company, forcing management at the end of March to announce that it spent “considerable time, energy and resources to conduct comprehensive internal and external diligence to uncover and address the inaccurate and misleading assertions made in the blog”, and finding nothing to suggest otherwise that it was in line with industry standards.
Then, in a trading update released 2 July, Blinkx revealed that trading in the first half came in below management expectations following the blog post’s disparaging comments on its “black-hat practices”, which compounded industry-wide issues of efficiency and effectiveness — the allegations still unproven, the profit warning resulted in the shares cutting in half in less than a week regardless, sending them down to 35p.
Blinkx’s bottom line is forecast to drop by 27% in the current year and by a further 24% next year and, as a result, looks some way off being able to pay a dividend. So not a target for income investors, but how about growth investors? Well, it currently sits on a P/E of around 12, which isn’t expensive but is still not particularly cheap. After such a volatile 12 months, there does not seem to be enough upside at present levels for me to consider it as a contrarian play at the moment.
